How Nigerian artists are underpaid by local digital distribution companies and the system

The world of music distribution in Nigeria is as complex as it comes; A mazy network of companies, middlemen, agents, artists and frauds seeking to benefit from a structure created and dictated by huge telecommunication companies. They exist to take the music created from the streets of Nigeria and turn them into raw cash.

Every other day, and week, artists and agents sign deals in the halls of companies which are set up to find new ways to make cash from the music industry. As with anything that involves money, the details are never made public, neither are announcements made. Everything is bound by an unspoken sense of loyalty which brings together the creative and distribution facets of music.

But sadly, only a tiny fraction of that money gets into the actual hands of the artist.

In September 2017, Nigerian rapper Ycee sent a series of terse tweets to Michael Ugwu, who is the founder of Freemedigital, a music distribution company in Lagos Nigeria which describes itself on their website as “Nigeria’s foremost online digital music distribution network with a growing array of artists, labels, comedians and content creators across the region on our platform with radio rights to all content licensed.”.

“Ever wondered why these execs running digital sharing companies live like they signed all the artistes?” Ycee asked. “Cos they eating everyone's [money].”

Michael Ugwu responded to Ycee swiftly. In a series of tweets, the music executive indirectly declared his innocence, and explained more legal means of resolving disputes rather than social media. Nothing further has been heard of the case, with all parties involved refusing to talk to the media.

But an official statement by FreemeDigital distanced the company from Ycee. “This dispute is between Tinny Entertainment and Sony Music Entertainment; Freeme Digital has no part in it,” the statement read.

At the top of music distribution in Nigeria is Music Plus, an app launched in 2014 by telecommunications company MTN Nigeria. MTN might be the front for the app, but it doesn’t own the product. The real owner of the product is Huawei Technologies Co. Ltd., a Chinese multinational networking and telecommunications equipment and services company headquartered in Shenzhen, Guangdong.

Music Plus was introduced into Nigeria via MTN, the biggest mobile carrier in Nigeria. Huawei partnered with MTN in a deal which brought Music Plus into the Nigerian music market. MTN offered Huawei access to their subscriber base, which in October 2016, was put at 60.5 million.

What Huawei offered was simple. A chance to make money for MTN and themselves via selling music to their subscriber base and extracting payment. The subscription model is very simple, as an MTN customer, you subscribe to Music Plus through the network, they extract payment from your airtime, and when your subscription is out, and they simply renew it by charging your airtime.

Another music distribution and streaming platform, Cloud 9, was launched by the defunct Etisalat (now 9mobile) in September 2015. Just like Music Plus, Cloud 9 is owned by Timwe Group, a mobile company, which according to their website, operates in 80 countries, delivering “high impact mobile engagement solutions propelled by over 10 years of industry expertise and proprietary technological platforms.”

The third major player in Nigeria music distribution is Boomplay Music, a company owned by phone giants, Tecno Mobile, which unlike the others, did not go through a mobile platform. Instead, they leveraged on the large market share of Tecno phones in Nigeria to launch the product. Users can pay via their mobile credit on all networks, or bank-issued debit cards.

Music Plus, Cloud 9 and Boomplay companies signed deals with middlemen/agents who operate as Value Added Services Companies (VAS), or distributors. These distributors require a licence to operate, and they are the ones who strike deals with the artists and record labels, technically referred to as Content Providers to supply music to these platforms. Freemedigital, which was put on blast by Ycee is one of these companies.

So a distribution company signs a deal with a Content Provider, and another deal with Music Plus, Cloud 9 and Boomplay Music to supply them with content as middlemen.

For example, Tinny Entertainment, a record label under which Ycee is signed to, will strike a deal with FreemeDigital to distribute and manage Ycee’s music on these platforms. Tinny Entertainment is the content provider, Freemedigital is the distributor and Music Plus, Cloud 9 and Boomplay Music are the platforms.

All of these services are regulated by the Nigerian Communication Commission (NCC), which provides operating licenses for these companies, and charge them an annual operating levy.

Modus Operandi and value for artist

While the wave of digital streaming and downloads washed across the world, global streaming markets were dominated by the music giants Apple, Spotify, Pandora and more recently, TIDAL.

While iTunes was accessible to the country, Spotify was unavailable in Nigeria, and the global competition meant that Nigerian musicians wouldn’t be able to generate enough revenue. These local streaming companies, played in the local market, earned revenue in Naira, and could market to the millions of people familiar with the local artists. It was a dream come true.

Previously, Nigerian artists relied heavily on performance and appearance fees as major sources of revenue. With physical CD sales from Alaba dwindling, and the improvement in technology and access to the internet, people already had turned to the internet and music-hosting websites as a major source of their music. Local streaming platforms offered a convenient and cheap alternative to free consumption of music.

Music Plus makes the highest number of sales due to possessing the largest subscriber base. So they sell music to MTN Subscribers, and also push ringback tunes to them. These subscribers pay for the music using their airtime, and MTN logs everything on their platforms. It is via these logs that they calculate and make payments to the artists.

But here’s the deal. The splitting of the revenue means very little gets to the artist.

Let’s say in 4 months, Music Plus generates N100 for Ycee’s hit record ‘Juice’. The money goes through a lot of splits before it gets to Ycee.

The first stop is MTN, who first deduct an undisclosed percentage of the revenue for ‘data costs’ and subscription charges. None of our contacts agreed to disclose the percentages, but they admitted that it was a wrong charge.

“The customers have already paid for the streaming data, they are the ones who buy the internet,” a source said. “Why MTN thinks they still need to take more money from the artist is lost on me.”

The next stop is between MTN and Huawei who run the platform. They take 60% percent of all revenue generated. Music Plus is run by Huawei and MTN provided subscriber base, so they take N60 out of N100. Before paying N40 to the distribution companies.

Many distribution companies have different deals with the Content Providers (Record labels and artists). An industry best-case-scenario standard is a 50-50 split between the distribution company and the record label or artist. But investigations have shown that some artists sign as low as 60-40 or 70-30, with the larger share going to the distribution company. If the artist is independent, then they sign the deals themselves. Other than that, the record label negotiates on behalf of the artist.

For Ycee, Tinny Entertainment and Freemedigital might have a deal that pays 50-50. Out of N100, Freeme will receive N40 from Music Plus, which they have to split 50-50 with the record label. That means, Freeme keeps N20, and gives the record label N20.

The record label takes home the money and runs it through their agreement with Ycee. If Ycee’s label contract splits his revenue 70-30 in favour of the record label, he gets to take 30% of N20, which reads off as N6. From that money he has to pay his manager 15%, leaving him with N5.1 out of N100.

This means that if Ycee’s music generates N100 million from Nigerians, he gets only N5 million, which is 5% of the total sum.

“The network and platform make the most money, the artist only gets peanuts,” a record label executive tells me. “And funny thing is, we can do nothing about it, the system is set up for them to make more money than those who sweat day and night to create the music.”

Boomplay is the second most lucrative platform due to the huge market share of Tecno mobile phones in Nigeria. Every Tecno phone in Nigeria has the Boomplay app as its native music player, and so people are encouraged to subscribe, stream and download music within the app.

Due to the company owning the platform, they simply split revenues 50-50 with the distribution companies, who then pay 50% of that money to the content provider.

Still utilising the earlier split between the record label and the artist, the artist gets to keep N7.5 out of N100.

Cloud 9 Platform and 9mobile

Cloud 9 which is operated by the Timwe Group and Etisalat splits revenue just like Boomplay, they pay out 50% and the artist gets to keep N7.5 out of N100.

Mind you, if an artist is independent, then they sign the Content Provider deals with the distribution company. Using this model they get to keep N25 for Cloud 9 and Boomplay. And Music Plus will pay them N20.

In most cases, artists will never get to make up to N100 in sales, and so the lower the sales, the lower the figure for artists.

“It’s like we’re working for the companies,” says an artist, who asked not to be named, of course. “They rip us off, take all the money, and we are left with very little peanuts.”

We reached out to Cloud 9, where we spoke to Lanre Jolaoso, who is the Content Manager of Timwe, and manager of Cloud 9. He told Pulse about the challenges of doing business in Nigeria, and cracking the music distribution business in a country where ‘free music’ is the norm. He also explained the importance of telecommunications companies and why they are necessary for the business.

“Because we have the strength of the networks behind us, that’s basically the difference between surviving and not surviving in this business. We have 21 million people on the network. It’s an advantage when compared to not having a telco to back you. You have to invest heavily to source for subscribers. We have the pool where we market to and opt-in to that service,” Lanre said.

Hope Isn’t Close

There have been numerous moves by people along the chain to improve on the sharing ratios to favour the content creators. Investigations reveal that every year since 2014, there have been moves by numerous parties to change the status quo. But none have worked.

And according to sources, it’s because of the telecommunication companies and artists fighting to be in bed with them due to the promise of lucrative endorsement deals.

“The big artists sabotage all efforts to change things. They are the ones with the most power to create change. They have the highest streaming and download numbers.” says a staff of a distribution company who asked not to be named. “They are too scared to make big change. They don’t want anything to affect their revenue stream. Nobody wants to lead the revolution alone, but finding people to join in it is a huge question. Every time someone attempts to do it, there’s pushback from the networks.”

Getting big corporations to make changes isn’t simple, but it is possible in the music industry. In 2015, when Apple launched their streaming service, Apple Music, they offered a three-month free listening period to attract customers in a trial version. But with one huge caveat; artists will not get paid for those three months.

But thanks to Taylor Swift, the decision was overturned. The pop singer took to her Tumblr blog and called the move by Apple “shocking and disappointing.” She wrote, “we don't ask for free iPhones.”

To protest the Apple Music's move to not pay artists, producers and writers, she said the company would not be allowed to stream her album, "1989," which includes top Billboard songs like, ‘Bad Blood.’

And, in response, the giant folded. Apple Music executive Eddy Cue tweeted out, “Apple Music will pay artists for streaming, even during customers' free trial period.”

In Nigeria, no artist wants to be Taylor Swift. “They want to continue making money, no matter if the system does not properly compensate them.” Another staff of a distribution company says. “Nobody can save us. No one wants to be Jesus, and die for others.”

With no one bold enough to make the move, the system of underpayment continues. There is no one strong enough to make a case against it and push for a fairer revenue split.

“Nobody can give you change unless you demand for it. All music groups need to come together to make a stand for the telcos, before anything can be achieved,” says Akinyemi Ayinoluwa, Esq., who is a lawyer and advisor at Hightower and Graysage. “Everyone has to put together a united front and make a demand.”

In a speech at the 2016 Nigerian Entertainment Conference, African pop star D’banj cried out about the system and questioned why the ratio of splitting revenue favours the networks and not the creatives.

"As artists we are not looking for new money; the money is there already. Last year digitally available music made 80 billion. 60% went to network providers. The remaining 40% went to content providers,” D’banj said.

Mechanical royalties are royalties that are paid to a songwriter every time a song they have written is copied, as opposed to performing rights royalties which are paid when a song is performed (or when a recorded performance of the song is played).

What these platforms pay is performing rights royalties to the singers. They don’t pay royalties to songwriters.

In May 2016, MTN were slammed with a N16 billion lawsuit by the Copyright Society Of Nigeria (COSON), for six separate declarations of copyright infringement. Amongst the reasons for the claim were the operation of MTN Callertunez platform; the MTN Music Plus Platform and the MTN Mobile Radio.

COSON which is a non-profit making organization of all owners of copyright or neighboring rights in musical works and sound recordings, demanded that mechanical rights need to be paid by MTN.

By December, a framework for this was reached out of court after a meeting between COSON and MTN reps at the Lagos Court of Arbitration in Lekki, Lagos. According to the chairman of COSON, Tony Okoroji, who spoke in a press release published on their website, both parties agreed on both the framework for a possible settlement of the matter and a time frame for different actions to be taken.

“COSON and MTN are friends. We have a great relationship, and they are a responsible company,” says Chibueze Okereke, Head of Corporate affairs at COSON. When asked for further information, Okereke said he was not in a position to disclose more.

Views From The Network

Music Plus declined to talk to Pulse for this report. But Lanre Jolaoso, who manages Cloud 9 was vocal about the split ratios and the many ways in which they have tried to cut out the middlemen.

The middlemen are a necessary evil, according to Jolaoso. There are thousands of musicians in Nigeria who would want to sign up to streaming companies. Handling the requests and managing the content directly will put much strain on the platforms, and bring on a lot of variables. The middlemen take care of that part, and leave the technical aspects to the platforms.

Cloud 9 has also tried to cut out the middlemen, with very little success. An example is for the company to sign artists directly in a limited scheme. Artists who skip distribution companies have to be signed to an endorsement deal from the network, and would also have to relinquish their freedom to distribute to other platforms. Instead of helping, it further reduces the revenue to the artist.

“It helps for them to distribute across platforms via the middlemen. That way they make more money,” Lanre says.

Still More Losses

Systemic underpayment aside, there are still lapses in the system that enables fraudsters to defraud artists. Many upcoming artists without appropriate information fall victims to music distribution scams.

Seeking to get a slice of the cake, they subscribe to numerous agents who promise them placement on these platforms. They pay a fee which is usually around N50,000 to these agents who abscond with the money.

Other times, artists are at the mercy of distribution companies who manage their content and distribute them. Many artists who spoke to Pulse but demanded not to be quoted, complained of experiencing little or no clarity in dealing with the distributors.

Rap legend T.R, formerly known as Terry Tha Rapman, released a single titled ‘Baby boy’ in April 2017, handed it to FreemeDigital with an agreement signed. But months later, he is yet to receive a report about the performance of the single.

“My team has reached out to them several times asking for information about the single, but no one has responded to me after months,” T.R says.

FreemeDigital would later release T.R's log to him.

Other cases involving various businesses include artists possessing a distrust for the numbers that are revealed to them and many more.

According to more sources who spoke with Pulse, there's another separate racket going on to rob artists of their rights. Distribution companies without the permission of artists and no contractual agreement, licence music to content platforms and illegally collect royalties.

"In Nigeria, you only know 3 companies, plus Apple Music, Spotify, and TIDAL. How about the thousands of other platforms where Nigerians don't visit in numerous countries? " a source said.

Others who spoke to Pulse pointed fingers at FreemeDigital as a huge culprit. According to these sources, the company is prolific in this illegal practice, and have been fingered by numerous artists. The victims of this practice don’t have to be unknown artists. Sources mentioned Nigerian rapper Olamide, Pop singer Seyi Shay, and versatile artists Mystro as victims of FreemeDigital.

Speaking to Techfinancials, Herman Singh, MTN's Group Chief Digital Officer said MTN built the capability to offer music to its customers in eight different formats: MP3, ringtones, caller ring back tones, streaming, radio streaming, IVR Radio, music subscriptions and music videos. MTN also offers access to a variety of local content.

All of that and more have made MTN into Africa's biggest music distributor leading to the $70 million generated in revenue from just digital music distribution. Nigeria Communications Week reports that the regions with the most downloads include Nigeria, Cameroon, Cote d'Ivoire, Benin, Ghana and other West African countries.

But in all these countries, artists still receive the least cut available for their music. We reached out to reps of Music Plus, but according to our contact, our request for a comment was “not approved by the company.”

Michael Ugwu, general manager for Sony Music Entertainment West Africa, told Reuters in 2016, that Sony Music is working on setting up partnership deals in Nigeria with telecoms companies MTN, Airtel and Etisalat since opening an office in commercial capital Lagos in February 2016.

Sony Music was focused at that point on working out a deal with the local telecommunication companies, where they pushed for a new model for revenue sharing in the local markets. Being an international record label, with a huge catalogue of the greatest artistes, they believed they are in a strong position to influence that, and get a better deal than the local players.

Although the details of that deal were never disclosed, Sony were able to get Davido’s “Son Of Mercy,” and Ycee’s “The First Wave,” EP on local platforms. But Wizkid’s major release, “Sounds from the Other Side” didn’t make it to local streaming platforms.

How did they do it? Did they beat the system? What special deals did they strike to enable their content get onto the platforms.

Nobody knows. But for millions of artists who hope to make money from indigenous streaming companies, the status quo remains. The hustle continues for them, and if they ever rise to the point where they can make money off their music, the pay that comes to them will be less than their counterparts in other parts of the world.